Solving the Foreclosure Crisis

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The foreclosure crisis has occurred for many reasons. Banks offered subprime loans and teaser rates. They approved under-qualified people to borrow more than they could afford to repay. These borrowers, so desperate to own a home, borrowed over their means, counting on a future and now non-existent upswing of the housing market to allow them opportunities to refinance at lower rates after teaser rates expired. As the housing market fell, the banks no longer offered the refinancing that these borrowers counted on, and other economic issues caused many of them to be on even less firm footing then when they got their mortgages. Foreclosing on homes that are unsellable in a slow market helps no one. Foreclosing on a home is devastating to the owners. They not only loose their home, but their families are uprooted. They are faced with nerve-racking and disconcerting circumstances for everyone in the family, including and especially the children. Some may even face homelessness because of it. It also hurts the bank, which looses money and has to extend the time and expense to try sell the house. In this economy selling is difficult and homes sit on the market for long periods of time. Empty houses hurt the community, making it less desirable to live in. Also, when banks loose money from foreclosure, they pass on the expense to new borrowers, making it harder to afford houses in the community. The economy in general is hurt by foreclosure because debt is a commodity which is sold and incorporated into investment packages. The idea is that when the debt is repaid, the interest paid on it is the financial incentive for the investment. With foreclosures, investors loose money and cannot afford further investments. With fewer... ... middle of paper ... ...ney matters. It is better to wait and force yourself to save enough to be ready and able to buy a home. Then you can live contentedly knowing that you can pay for it and not constantly fear foreclosure, uprooting your family and the possibility of becoming homeless. I also think a law should be passed about the degree to which a bank can vary from the prime rate, and should include a formula of basic borrower qualifications to help keep this crisis from continuing as more homes are sold in the future. Fixing the situation of the current foreclosure candidates is only part of the solution. The other part needs to be to make it so that this can’t happen again. If that means that some people will have to wait longer to achieve home ownership, then that’s fine. At least when they do reach that goal, it will be on firm footing and without fear of foreclosure.
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